The New Jersey Transfer Inheritance Tax is imposed upon the transfer of property based upon the clear market value of such property. Clear market value is ascertained by deducting from the market value of any property, the debts, expenses and taxes which constitute an encumbrance upon the property of a decedent. No deductions are allowed, however, against any property which is exempt or not subject to the New Jersey Inheritance Tax.
18:26-7.2 Decedent’s debts
All debts owing at the date of a decedent’s death are deductible from the property comprising such decedent’s estate unless the property for which the debt is owing or for which it is secured is not subject to the New Jersey Inheritance Tax.
18:26-7.3 Debts secured by out-of-State real property
The debts of a resident decedent owing for or secured by real property outside this State are not allowed as a deduction, unless such debt exceeds the value of the property securing it or for which it was contracted, in which event only that amount by which such debt exceeds the value of the out-of-State realty is permitted as a deduction.
18:26-7.4 Mortgages
The balance of a mortgage owing on the date of death is allowed as a deduction from the value of any real property securing such mortgage, except that in the case of realty held by a decedent and a surviving spouse/
civil union partner as tenants by the entirety, the amount of any mortgage owing on such realty at the decedent’s death is not allowable as a deduction since such property is exempt from the New Jersey Inheritance Tax.
Amended by R.2008 d.72, effective April 7, 2008.
18:26-7.5 Debts secured by life insurance
Any debt of a decedent owing at the date of death and covered by the purchase of life insurance payable to a creditor of the decedent, in order to liquidate a debt arising from the acquisition of property for which the decedent was liable to such creditor, is not allowable as a deduction since the debt is regarded as extinguished at the date of death by payment to said creditor of the insurance proceeds and, therefore, the decedent’s estate is not diminished by the amount of debt.
18:26-7.6 Debt for claim of county welfare boards or State institutions (a) A deduction is permitted in the case of a claim by a county welfare board or a State institution for money advanced to or on account of the care provided a decedent as an indigent person, provided that such claim is accompanied by the following data:
1. A letter signed by a representative of the welfare board or State institution stating the exact amount due from the decedent as of the date of death;
2. A supplemental affidavit of the executor, heir or administrator, as the case may be, stating whether or not he acknowledges the correctness of the amount of the claim and will pay the same in full out of the assets of the estate. If not, the supplemental affidavit should set forth the facts involved and if the matter has been settled, set forth the amount that has been paid or will be paid in settlement.
(b) An exception to the above is where the affidavit in which the claim is made is signed by a representative of the welfare board as executor, administrator, or otherwise, in which case no further investigation will be
needed unless there is some other data in the record indicating that the amount claimed is possibly incorrect.
18:26-7.7 Estates subject to escheat
Estates subject to escheat containing claims for services rendered to the decedent or advances made to the decedent are held in abeyance pending a final determination made with respect thereto by the Attorney General’s Office, Escheat Section. The representatives of the estate will be so notified.
Amended by R.1994 d.627, effective December 19, 1994 18:26-7.8 Funeral and last illness expenses
(a) A deduction is allowed for all reasonable funeral expenses and last illness expenses uncompensated for by insurance or otherwise, owing and unpaid at the decedent’s death for which the decedent’s estate is liable.
(b) Funeral expenses include any reasonable costs incurred on behalf of the decedent payable by the estate:
1. Any deduction for funeral expenses is to be reduced by the amount of any death benefit paid or payable under the Social Security or Railroad Retirement Acts of the United States where the same are paid or payable to any person or fiduciary other than the spouse of the decedent;
2. What constitutes a reasonable funeral cost or expense will depend upon the facts and circumstances in each case; however, primary consideration will be given to the size of the estate and the amount thereat claimed as a deduction for such expenses.
(c) The expenses of a decedent’s last illness allowable as a deduction include the expenses of care, nursing, medical attendance, medicines, hospital and other charges incident to such illness unpaid and owing at decedent’s death and not compensated for by insurance or other payments.
18:26-7.9 Administration expenses
A deduction is allowed for all the reasonable and ordinary expenses of administering a decedent’s estate including reasonable and ordinary executors, administrators and attorneys fees, and, in addition, the reasonable cost incurred on an appeal from a determination of the Inheritance Tax Bureau.
18:26-7.10 Executor’s and administrator’s expenses
(a) In the absence of a judgment of the court exercising jurisdiction over the probate of an estate, the deduction for executor’s or administrator’s commissions shall be determined in accordance with N.J.S. 3B:18-14 as of the date of death of decedent as follows:
First $200,000 5 percent
Next 800,000 3 1/2 percent
Excess over 1,000,000 2 percent
If more than one executor or administrator has been appointed, each additional executor or administrator may take an additional one percent of all corpus provided that no one executor or administrator shall be entitled
to any greater commission than that which would be allowed if there were but one executor or administrator.
1. Where the amount claimed by the executor or administrator or allowed by the court is less than that determined by the application of the rates set forth in (a) above, only such amount as claimed or allowed shall be permitted as a deduction.
(b) Where a formal account is filed in accordance with the Rules of the Court, with the court exercising jurisdiction over the probate of an estate and the amount allowed by the court for executor’s or administrator’s commissions is greater than the amount previously determined by the Branch, the fiduciary must forward a plain copy of the judgment allowing commissions and upon revision of the assessment there shall be applied the rate set forth by the court in its judgment to the value, as of the date of death as determined by the Transfer Inheritance Tax Branch of the property on which the allowance of the court is based, but the value of any property excluded from the New Jersey Transfer Inheritance Tax shall be excluded from the computation. See N.J.A.C. 18:26-7.1. If the Branch makes an assessment denying executor’s or administrator’s commissions, a written protest must be submitted to the Branch within 90 days in accordance with N.J.S.A. 54:49-18 and N.J.A.C. 18:26-12.9 in order for the Branch to consider a subsequent court judgment allowing the commissions. In order for the Branch to reopen an assessment subsequent to a judgment, a copy of the account must be filed with the Branch at the time of the filing with the court and a copy of the judgment specifying the rates to be applied to corpus must be forwarded to the Branch.
(c) The value of property which is held by the decedent and another as joint tenants with right of survivorship, as trustee for, or payable on death to another or which has been the subject of an inter vivos transfer, in contemplation of, or to take effect in possession or enjoyment at or after death, is to be excluded from the amount on which an executor’s or administrator’s commissions is computed in the absence of the judicial allowance thereon.
(d) Executor’s or administrator’s commissions are allowed on real estate that is actually sold by the executor or administrator or which is expressly directed to be sold by the terms of the decedent’s will. The real estate must be sold by the representative and not the beneficiary(s) in order to qualify.
(e) In the absence of a judgment of the court exercising probate jurisdiction over the estate, and the filing of a plain copy thereof with the Branch, the provisions of N.J.S. 3B:18-16, shall not be considered in the determination of the amount allowable as a deduction.
Amended by R.1989 d.85, effective February 6, 1989; R.1991 d.384, effective August 5, 1991; R.1996 d.15, effective January 2, 1996; R.2001 d.259, effective August 6, 2001.
18:26-7.11 Counsel fees
(a) The deduction allowable for counsel fees shall be determined on the basis of their reasonableness. The appraised value of the decedent’s estate, for New Jersey Inheritance Tax and Federal Estate Tax purposes shall not be considered as the criterion for the determination of the amount allowable as a deduction for counsel fees.
(b) No deduction shall be allowed for counsel fees paid to an attorney who is not a member of the Bar of New Jersey, except in cases where the services rendered by such counsel relate to matters not involving the New Jersey Inheritance Tax proceedings.
(c) The Director may, in his discretion, require the submission of an affidavit of services by counsel for the personal representative of an estate where it appears that the amount claimed as a deduction for counsel fees is other than ordinary or reasonable.
18:26-7.12 Real estate broker’s commissions
(a) No deduction is allowed for commissions paid or payable to a real estate broker or agent in connection with the sale of real estate of which a decedent dies seized except where:
1. The real estate was the subject of a contract of sale entered into by the decedent in his lifetime; or
2. The real estate is actually sold by the executor or administrator (the real estate must be sold by the representative of an estate and not the beneficiary(s) in order to qualify); or
3. It is necessary in the administration of the decedent's estate to effect a sale of said real estate for the purpose of liquidating debts, or the payment of the expenses of administration of the estate, or for the payment of legacies.
Amended by R.1994 d.627, effective December 19, 1994.
18:26-7.13 Storage expense
(a) No deduction is allowed for expenses incurred by an executor or administrator for the storage or preservation of tangible personal property except where the nature of the property or the value thereof is such that delivery to the legatee thereof is not possible within a reasonable time subsequent to death.
(b) No deduction shall be allowed for expenses incurred for the preservation, maintenance or upkeep of real estate of which a decedent dies seized, either individually, jointly or as a tenant in common.
18:26-7.14 Operating costs of business
No deduction is allowed for the cost of operating a business in which the decedent had an interest at death. These expenses are not deemed an ordinary expense of administration and should be charged as an expense of the business.
18:26-7.15 State, county and local taxes
(a) A deduction is permitted for any State, county and municipal taxes owing and unpaid at the date of death on any real property of a decedent which is subject to the New Jersey Inheritance Tax. The amount allowable as a deduction on such property for the current fiscal year, however, is limited to that sum representing unpaid taxes as the elapsed portion of said year bears to the full year. No deduction is allowed for State, county or municipal taxes assessed or accruing, subsequent to the death of the decedent.
(b) No deduction for unpaid State, county and municipal taxes is allowed where the realty owned by the decedent was held by such decedent and a surviving spouse/civil union partner as tenants by the entirety, unless it can be shown that during his lifetime, the decedent appropriated all of the income from such property without having paid any of the state, county and municipal taxes and other charges assessed against the realty.
Amended by R.2008 d.72, effective April 7, 2008.
18:26-7.16 Transfer taxes due other jurisdictions
(a) A deduction is allowed for any transfer, succession or legacy taxes paid or payable to any state or territory of the United States, including the District of Columbia or any foreign country provided the property upon which such tax is paid or payable is subject to the New Jersey Transfer Inheritance Tax.
(b) The amount due or paid the United States Government as a Federal Estate Tax is not allowable as a deduction.
18:26-7.17 Loans secured by life insurance policies
(a) A loan made to a decedent as the insured by an insurance company against a life insurance policy is not considered a debt of the decedent but rather an advancement on the cash value of the policy and the deduction is not allowable.
(b) A loan made by a third party to a decedent secured by the assignment of a life insurance policy on the life of the decedent and satisfied from the proceeds of the policy is also not allowable. However, the right of the beneficiary to reimbursement from the estate for the amount of the loan is a proper claim by way of subrogation against the decedent’s estate and is an allowable deduction unless a contrary intention is indicated.
New Rule, R.1971 d.2, effective January 4, 1971.
18:26-7.18 (Reserved)
SUBCHAPTER 8. ASSESSMENT AND VALUATION